There are few anxieties that hit harder than the possibility of losing your home. If you have a family and children, multiply that by a hundred. Tens of thousands of homeowners and families are going through that ordeal right now in Rhode Island. However, if you are one of the million plus residents in Rhode Island you can be grateful to live in a state with one the best mortgage aid programs in the U.S.

This series of articles will look into the mortgage aid programs available in Rhode Island and what steps you should take to make the most of them and save your home from foreclosure.  It will also look at educational campaigns like “Don’t borrow trouble” and “Fair Housing Rhode Island” sponsored by the state government.

However, the first piece of advice, whether you live in Rhode Island or Texas is to act quickly. At the end of these articles we provide links to the programs and agencies that can help you. If you are struggling to pay your mortgage contact them quickly. More importantly, contact your lender as soon as possible and ask for help. Help is available for many borrowers find out if you are one of them.

Rhode Island Housing

Rhode Island Housing is a self-sustaining public agency which works with its own income. This means that no tax dollars are used to provide the mortgage aid programs they offer. Income is generated by selling tax-free bonds. Rhode Island Housing is a shining example of what can be done with a little vision and creativity to provide practical help without asking for charity or charging extra taxes. It works similarly to the California Housing and Finance Administration, although unlike the Californian agency it does not only focus on first time buyers and rentals.

Rhode Island Housing has served the residents of Rhode Island for more than 30 years. They provide low interest mortgages, grants, counseling and education to people who want to buy a home, rent one or modify an existing loan. According to the agency more than 60,000 families have bought a home thanks to their programs. They have also financed the building of over 14,000 to rent to low and medium income Rhode Islanders. The beauty of this agency is that it doesn’t only sell mortgages, and modify loans it also invests in the homes of borrowers to make them safer and healthier to live in. In the last thirty years they have invested over three billion dollars in renovating the homes.

What I like about this housing agency is that besides not using tax dollars to work it is a good business. It has won thirteen national housing awards and has earned the Standard & Poor’s “Top Tier” investment. It is not a charity in the traditional sense but a profitable company that reinvests all its profits and net worth in helping low income Rhode Islanders.

But enough of the marketing spiel let’s get into what programs you can apply for.

Rhode Island Housing is a government agency that provides Rhode Islanders with help to buy, rent and keep a home. The agency does not spend tax dollars, but gets income from the sale of tax-free bonds. If you own, or plan to buy a house in Rhode Island you should continue reading. This is a summary of some of Rhode Island Housing’s main programs.

FIRSTHOMES 100 & 100+

FirstHomes is RI Housing’s main product for buyers. It provides borrowers with a low fixed rate 30 year mortgage with hundred percent financing. RI Housing also offers free counseling, education and continuing support with every mortgage.

FirstHomes 100+ offers the same deal plus funds to pay for essential repairs (no swimming pools, sorry) and repairs on the home. They will even assign a consultant to guide you through the renovation. That is what I call service.

Would you like to know if you can qualify for one of these loans? There is an online qualification form you can fill in. You will need to provide some paperwork:

Tax returns of the last three years with schedules and W-2 forms. Recent pay stubs, or another proof of employment, statements on your three most recent checking accounts. If you are self employed provide a year profit and loss statement.

Before applying you should request a free credit report at www.annualcreditreport.com and correct any mistakes that might be lowering your credit score. RI Housing might want to help low income buyers but they still need to protect their assets and cannot lend to high risk borrowers.

Although FirstHomes is (obviously) designed for first-time borrowers you can also qualify for this program if you have not owned a house in the last three years, you haven’t lived in the home you own for three years or you have an interest in living in certain areas of Rhode Island.

Home Repair Loans

RI Housing also offers loans to repair and upgrade your home. This money can be used to fix a variety of problems to keep your home safe. You can borrow up to $25,000 with a 20 year, fixed rate mortgage. The interest rates for these loans are the same as for mortgages

RI Housing also provides similar loans for Access Independence Home Repair Loans. This is carried out for the Mental Health Department. This includes remodeling on a house to make it suitable for a person with physical disabilities or limitations.

You can also apply for a Community Septic System Loan and a LeadSafe homes program. These programs provide financing to repair or replace your septic tank and to deal with the cost of making a property lead safe.

These programs are part of a comprehensive plan to provide inexpensive mortgages and help people keep their mortgages and homes safe.

However, there are more programs that could help you wade the current financial crisis or even plan for retirement. Read all about it in the final article of this series: Rhode Island Housing: Reverse Mortgages and Equity Loans.

The state of California and the U.S. Government provide borrowers and lenders in California with mortgage aid programs and incentives. Although these programs are not for everyone and are not a silver bullet for all mortgage problems; it is worth spending some time learning about what choices you have and the pros and cons of each program.

The responsibility of providing mortgage aid in California falls on two main agencies: the California Housing and Finance Agency (CalHFA) and the Obama’s administration Making Home Affordable Plan (MHA). CalHFA focuses on low to medium income first-time buyers and sponsored rentals. MHA focuses on loan modifications, refinances and foreclosure alternatives for struggling borrowers.

As described in our previous post on California mortgage programs CalHFA provides several mortgage aid schemes to help low income borrowers pay for down payments and closing costs. These two expenses are the reason many borrowers cannot afford to buy a home. Examples of this are the Affordable Housing Partnership Program, which allows borrowers to combine their down payment with their mortgage and closing costs.

The Making Home Affordable is a comprehensive plan that provides several options to borrowers. Unfortunately the number of borrowers that have qualified for the programs is small in comparison to the number of borrowers facing foreclosure.

However, as the Treasury department often reminds the media, the goal of the program is not to help everyone, only responsible borrowers that have the income to afford a refinanced or modified mortgage. To encourage borrowers to adjust their mortgages before they become delinquent the MHA plan grants borrowers with $1,500 if they modify their mortgage without becoming delinquent on their payments. This helps borrowers in several ways. It improves their chances of saving their home, reduces the costs related to foreclosure proceedings and improves the likelihood of borrower not becoming delinquent in the future.

A similar program also sponsored by MHA is the “Stay Current” mortgage incentives. This program gives $1,000 a year for five years to borrowers that pay their mortgage on time after a loan modification. This money is used to pay off the principal balance of the loan which saves borrowers because it reduces the balance on which interest is paid.

Servicers also receive incentives under the MHA plan. For instance mortgage servicers receive up to $1,000 every year for every borrower who stays current on a loan modification arranged by the servicers. This provided servicers with an extra incentive to help borrowers get modifications they can afford to pay in the long run.

(Second article of Help for California Series. Read the previous article.)

California Housing Finance Agency focuses attention on first time borrowers and renters. So whether you are planning to buy your first home or you lost your home and need to find a suitable rental in California this is an agency you will want to visit.

California Housing Finance Agency home purchase programs include:

- 30-year fixed mortgage, California Homebuyer’s Downpayment Assistance Program (CHDAP) .

- The CalHFA Housing Assistance Program (CHAP).

- The 30-year Fixed – Government Insured/ Guaranteed Mortgage.

- The Affordable Housing Partnership Program (AHPP).

- The Extra Credit Teacher Home Purchase Program (ECTP), among others. This article provides a brief description of each program. Please visit CalHFA for more details.

30-Year Fixed Mortgage Program.

This is a basic 30-Year first home mortgage created to reduce costs and allow low to medium income homebuyers to purchase their first home in California. This program allows for up to 95% financing of the house value on a long term (30 years) fixed interest that allows for relatively low monthly payments.

California Housing Assistance Program (CHAP)

This program provides first time homebuyers with a second loan to pay for the down payment. The payment of this second loan is deferred to allow buyers who can’t afford a down payment to take their first step on the property ladder.

California Homebuyer’s Downpayment Assistance Program (CHDAP)

This program is similar to CHAP but is designed for buyers with a moderate income and has more flexible requirements.

Affordable Housing Partnership Program (AHPP)

This program partners with local agencies in offering first time homebuyers with help to pay for the downpayment and closing costs. This program can be used with CalHFA’s 40-year loan but you can only get the reduced interest rates if you combine it with a 30-year loan.

30-Year Fixed- Government Insured/Guaranteed Mortgage

This program combines a 30-year mortgage with a CalHFA junior loan or second loan to pay for closing costs and downpayments.

Extra Credit Teacher Home Purchase Program  (ECTP)

This program is designed for Californian teachers and school staff that are looking to buy a new house. Besides providing a low interest mortgage and help with the downpayment this program can “forgive” the interest on the loan for eligible borrowers.

As you can see, help is available for those that are willing to look for it. This is not to say that all struggling borrowers or hopeful first-time homebuyers are going to get the help they want. Some cases are lost causes, and need to rearrange their finances before they qualify. However in many cases a little research and investment in time and effort can land you on the mortgage deal you have always wanted.

California has several organizations and programs to help struggling homeowners get back on their feet. If you are a California resident and you fear you could lose your home this article is for you. If you are looking to buy your first home read on; California has several first-time homebuyer programs also.

However the first tip you should follow when thinking of refinancing, modifying a loan, or buying a new mortgage is to contact a housing counseling agency. They are agencies approved by the Housing and Urban Development department, and provide free (or low cost) professional advice.  Delaying action could cost your home or at the very least extra costs and fees on your mortgage.

One of these agencies is the Consumer Credit Counseling Service of San Francisco, which manages the Housing Education Program. This program provides free or low cost education to homebuyers and borrowers through education materials, workshops and personal counseling. Their early delinquency intervention program and post-foreclosure help program are of special interest. For a list of approved housing counseling agencies in California click here.

Unfortunately the housing crisis we are now suffering does not seem to be going away soon. Layoffs continue, health costs are rising and home prices remain low. This has created a housing “perfect storm” that has affected millions of homeowners.

Government mortgage aid programs in California focus on two areas: education and funding incentives for lenders. Education is important for lenders because often it is a lack of understanding of the foreclosure process that makes homeowners lose their homes. Obviously sometimes homeowners simply cannot afford their mortgages and their best choice is to find the most graceful way out of their mortgage.

However, in other occasions help is available and foreclosure can be avoided. This series of two articles will look at three types of California mortgage aid programs: mortgage protection, buying and tax credits.

CalHFA is one of the main mortgage aid providers in California. Set up in 1975; it has been around through various housing crisis. It is a State chartered affordable housing bank designed to offer affordable low interest loans. The agency can afford to offer the service thank to the sale of tax-free bonds, which are repaid with the interest of mortgage loans. No tax dollars are used to fund the agency.

Home Openers mortgage protection program is automatically included with every CalHFA mortgage at no extra cost. The free service covers your mortgage costs if you involuntarily lose your job and are receiving benefits from the California Employment Development Department and are making an effort to look for work. These payments will be covered for six months, giving you time to rearrange your finances. This forbearance period of six months is an excellent safety net you can use to arrange your loan modification if you think your situation will continue.

Learn about more mortgage aid programs in the second article of this series.

Myths, especially in financial matters, are dangerous. For instance, the myth that the value of homes can only go up; that there is no investment as safe as bricks and mortar was one of the catalysts of the housing crisis of 2008. Unfortunately there are still myths around that are affecting the decisions homeowners make.

Myth 3.  This is only happening to me, foreclosure is a rare problem.

This is a especially easy myth to debunk. According to the U.S. Treasury department over seven million homeowners are at risk of foreclosure. That represents a huge chunk of the total homeowners in the U.S. Factors like a drop in home prices, high levels of unemployment and rise in mortgage payments have created a “perfect storm” that is affecting homeowners of all walks of life. You are certainly not alone. However the steps you make, especially early on, will determine if you become a statistic or you save your home.

Myth 4. I’m receiving all kinds of offers of help from loan modification and housing counseling agencies. Can they all be scams?

Dishonest housing counselors are a problem in the U.S. After the housing crisis began hundreds of self proclaimed loan modification agents and housing counselors appeared out of nowhere. However, it would be unfair to say all of housing counselors are scams. Some are experienced agents that can provide valuable help. The key with housing counselors and loan modifications is to go for the free ones. This is a counterintuitive decision. We are used to thinking that you have to pay for quality; that the best professionals cost money. In housing counseling and loan modifications this is not true. The government has sponsored approved agencies all over the country so that you can receive quality advice for free or for an inexpensive fee.

Having said that if you decide to pay for advice on avoiding foreclosure and your agent asks you to:

a) Buy your home and then rent it back to you.

b) Pay fees upfront.

c) Sign things you don’t understand.

Then run. These are telltale signs of scam artists out to make a quick buck on desperate homeowners.

Myth 5. I’m too many months behind in my payments; there is no hope.

Although it is true you aren’t doing yourself any favors by delaying getting help. There is always time to try and save your home. Housing counselors and loan modification agents cannot work miracles but they certainly try. Sometimes a change in your budget or a mortgage workout with your lender can provide the break you need to rearrange your finances. Even if you cannot save your home you  can find alternatives to a foreclosure that dampen the negative effects to your credit of a foreclosure. Housing counselors can also help you take advantage of rental programs if you do end up losing your home.

Foreclosures have hit the American dream hard. Few things represent in our society than owning your own family home. And few things make us feel failure as hard as when we lose it. The housing crisis that started in 2008 is still affecting us today. Millions of homeowners are at risk of losing their homes, while hundreds of thousands already have. This has, quite naturally, created a mass hysteria, which is the perfect breeding ground for myths. Myths are a great read when they tell the stories of ancient heroes; but they are dangerous when people base important financial decisions on them.

We will dedicate two articles on debunking six myths that are widespread among homeowners nationwide. Unfortunately these misunderstanding are sometimes stopping homeowners from getting the help they need.

Myth 1. I am only one month behind; I can easily catch up. I am not at risk.

Foreclosure procedures start when you are behind in your payments, whether one month or ten. If you do not act quickly you could lose your home. Remember that when you are a month behind in your payments you owe two months: the one you are behind on and the current one. Ideally you should ask for help before you are behind in your payments. The earlier you contact a free housing counselor the more chances they will have to help you. Contact your lender and explain you are struggling with your mortgage payments as soon as you as you can. This gives the message you are serious about paying your mortgage, and increases the likelihood your lender will grant you a loan workout.

For free professional housing advice contact the Housing and Urban Development Department (www.hud.gov) or the Home Ownership Preservation Foundation (888-995-HOPE).

Myth 2. My lender would prefer to foreclose on my mortgage than help me keep it.

This is a dangerous myth because it creates a sense of helplessness. “If the mortgage company wants me out of this house, what can I do?” The truth is of course different. Mortgage companies are in the business of lending money for profit not owning, managing and selling homes. A recent study by the TowerGroup consulting company revealed that lenders lose $58,000 on average for every foreclosure. This happens because foreclosed homes rarely are sold for the balance of the mortgage, and the lender must also cover the fees and costs that go with selling a house.

The bottom line is that mortgage companies prefer you catch up with your payments and save your home. Of course, if they realize you can’t afford any payments and there is little chance you will be able to do so in the future; they will cut their losses and foreclose. That is your job;  to prove them you can afford reasonable payments if you are granted a loan modification.

Governor Arnold Schwarzenegger signed the California Foreclosure Prevention Act (CFPA) on February the 20^th 2009. The Act is designed to encourage lenders and mortgage servicers to provide loan modification programs to borrowers.

The Act extends the foreclosure process in California by 90 days. This provides borrowers with three more months to put their finances in order and find a way to avoid foreclosure. Mortgage providers can apply for an exemption from this extension to the State department. The state department provides exemptions to lenders and mortgage servicers that have a comprehensive loan modification program for borrowers. This program must provide help to borrowers and be designed to avoid foreclosure and help borrowers save their homes. The Act gives lenders an extra incentive to keep borrowers in their homes.

Who qualifies for this extension? Everyone qualifies, unless your lender is granted an exemption. The Act is aimed at servicers not borrowers. Generally borrowers will qualify for the extension as long as:

a)      The lender has not received an exemption because it has a loan modification program.

b)      The loan was signed between January 2003 and January 2008.

c)       The loan is the primary or first mortgage on the property.

d)      The borrower lives in the property.

e)      The borrower is not filing for bankruptcy.

These points highlight two important points you should consider carefully when deciding what to do when you are behind on your mortgage payments.

First do not leave your home regardless of what your lenders says. Until your house is placed on auction and sold and the forbearance period has ended you have the right to live in your home. Use it. The moment you leave your home you give up certain rights and are no longer eligible for certain mortgage programs aimed at borrowers that live in the mortgaged homes.

Second, don’t jump into filing for bankruptcy unless it is your last chance of saving your home and it is worth saving. Always talk to a bankruptcy lawyer before you make that decision. A bankruptcy will stop in their tracks any loan modification programs you might be in or had the choice of applying for. It also has long-term effects on your credit score. It will stay on your credit score for at least ten years making it difficult for you to get a loan in the future.

The California Foreclosure Prevention Act gives lenders and mortgage servicers 90 more reasons to provide loan modifications to struggling homeowners. However, the chances are you have many more questions on the Act. Does this mean every loan in California should receive a loan modification? What time frame does a lender have to apply for an exemption? Or where can I find more information on the content of the Act? We will answer these and other questions in the next article of this series.

The California Foreclosure Prevention Act (CFPA) was advertised as a bold and revolutionary measure to encourage lenders to help borrowers. Has the Act provided the help borrowers hoped for and still need?

The answer depends on what your expectations were. The Act is just one more measure the government, state and federal, is using to reduce the number of foreclosures. It encourages mortgage servicers to provide a loan modification program; it does not specify who should receive the loan modifications, or what loan modifications should be offered. Foreclosures have continued to rise in California, but more banks and lenders have a loan modification program borrowers can apply for.

In part because of this Act the list of mortgage loan servicers that provide loan modification programs has grown to include most national and local banks. You can check if your lender has received an exemption from the state department by visiting www.corp.ca.gov. If your lender is not on this list you automatically qualify for a 90-day extension on your foreclosure. If your lender is on the list you know there is a comprehensive loan modification program you can qualify for.

Remember that in most occasions a loan modification is in the interest of both you and your lender. The housing market now is a buyer’s market and lenders are finding it difficult to sell foreclosed properties. However, a loan modification can give homeowners a way to save their homes and lenders a chance of saving their investment.

However, sometimes lenders will claim to have a loan modification program, but will not comply with it, or make it impossible for borrowers to get a suitable loan modification. If this is your case contact California’s Department of Corporations at 1-866-ASK-CORP and report your complaint of noncompliance with the California Foreclosure Prevention Act. The Department of Corporations will tell you which state department is responsible.

This does not mean every borrower will, or even should, receive a loan modification. Some mortgages are beyond help, and probably should never have been granted. If you do not have any income, do not expect to find a job any time soon, and otherwise cannot afford reasonable mortgage payments you will probably not qualify for a loan modification. However, even in these cases the Act requires lender to provide alternatives to foreclosure that protect you from some of the negative effects of foreclosure, and allow you to cancel your mortgage more gracefully.

Anyway, whether you feel you are eligible for a loan modification or not, contact a federal or state approved housing counselor and ask for advice. Please find below a list of approved housing counselors in California as of June 2010. For an up-to-date list of housing counselors visit www.hud.gov.

Nevada residents have state, federal and charitable organizations that provide free advice and mortgage aid. This includes the Nevada Foreclosure Prevention Task (foreclosurehelp.nv.gov), the Home Ownership Preservation Foundation (Call 888-995-HOPE) or the Housing and Urban Development Department (HUD.gov).

The main resource these organizations can provide is quality information so you can educate yourself and negotiate a suitable mortgage workout with your mortgage servicer. However, many troubled homeowners struggle to see how talking to a friendly counselor is going to help them save their home and just try to work it out by themselves.  Unfortunately they are wasting a valuable resource that can improve their chances of avoiding foreclosure. Let us look at a few of the ways a housing counselor can help you.

Designing a budget.

The reason you are struggling with your mortgage payments is because your monthly budget is not working. Maybe you have new expenses, or your income has dropped. A good housing counselor will help you write out a new budget that allows you to pay your mortgage, or at least know how much you can put towards a mortgage. This information is very important. You should know what you can afford before you negotiate with your mortgage servicer. This information will also help you decide what kind of mortgage workout would benefit you the most.

Up-to-date Information

Housing counselors have up-to-date information on mortgage aid workouts, services and resources you can apply for. This includes legal, medical and other financial services that can help with other problems besides your late mortgage payments.

Negotiation

Your housing counselor can even call your servicer on your behalf and obtain information from your servicer. You must allow your mortgage servicer in writing by signing an Authorization to Release Information form before they can talk about your situation with a counselor.

Counselors can also help you fill in the information package your servicer sends. This includes guidance writing the hardship letter most Loss Mitigation departments ask for.

As you can see approved housing counselors are valuable resources for struggling homeowners. Call an HUD approved counselor near you and start making choices that can save your home from foreclosure. Visit this article for up-to-date lists of Nevada Housing Counseling Agencies.

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